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Online Publication Date: 15th

July 2012

Publisher: Asian Economic and Social Society

Analysis of Consumption and Demand Elasticities for Food

Products in Balochistan

Samina Khalil (Senior Research Economist), (Applied Economics

Research Centre, University of Karachi)

Hazrat Yousaf (Candidate, Department of Economics, Pakistan

Institute of Development Economics, Islamabad)

Citation: Samina Khalil, Hazrat Yousaf (2012) “Analysis of Consumption and Demand Elasticities

for Food Products in Balochistan”, International Journal of Asian Social Science Vol. 2, No. 7, pp.

1103-1122.

International Journal of Asian Social Science, 2(7), pp. 1103-1122.

1103

Author(s)

Samina Khalil

Senior Research Economist, Applied

Economics Research Centre

University of Karachi.

E-mail :samina.. [email protected]

Hazrat Yousaf Ph.D Candidate, Department of

Economics Pakistan Institute of

Development Economics Islamabad

E-mail - [email protected]

Analysis of Consumption and Demand Elasticities for Food

Products in Balochistan

Abstract

This study analyzes the households’ consumption patterns and

demand elasticities of Balochistan in both the urban and rural

areas. We make use of the Household Integrated Expenditure

Survey (HIES) of Pakistan for the year 2005-6. The linear-log

models are applied for the analysis of households’ consumption

patterns. The LA/AIDS model is used in order to estimate the

demand elasticities. The study shows that the households’

expenditure on food items is increasing at decreasing rate. All the

food items are considered as necessity except in the case of

vegetable ghee for urban and rural Balochistan. The high expenditure elasticities of several food items e.g. wheat, milk,

beef and vegetable ghee call for food support programs, different

agriculture policies like subsidies on electricity for water

irrigation, pesticides, etc. The major share of total expenditure is

devoted to wheat consumption than other food items.

Introduction

Demand theory has been widely applied to

determine individual or household

consumption behavior. There is hardly any

economic theory / research that do not include information of household consumption

patterns. Recently, investigators / researchers

are in struggle to provide an appropriate

answer to some fundamental questions

regarding consumer demand analysis, for

example, how should a demand function be

specified? What are arguments for changing

consumer demand pattern? etc. The

significance of any household income and

expenditure statistics for a country like

Pakistan is quite pronounced and well recognized. The need to analyze changes in the

standard of living of masses across a country is

mostly based on structured and comprehensive

surveys like HIES. It provides guideline to

policy makers in framing socio-economic

developmental policies and in instigating

public investments and financial measures to

improve economic conditions of the people.

The availability of information at different

points in time are helpful in evaluating the

changes which occur, as a result of economic development, in the consumption pattern,

incidence of poverty, trend in the saving

propensities and preferences of different

groups of population. Balochistan is the least

developed province of Pakistan as compared to

other three provinces. Its economic growth has

stagnated in the past decade because of limited

investment and capital accumulation. The last drought (1997–2002) decimated the livestock

population, and rural incomes have been hit

the hardest. This province basically lacks a

coordinated economic policy and a viable

strategy for economic development. It has seen

no significant investment in productive

streams (such as minerals, agribusiness, and

fisheries) and human resource development.

This paper is an attempt to undertake analysis

of households’ consumption patterns and demand elasticities of under-developed urban

and rural Balochistan1. Household Integrated

Expenditure Survey (HIES) of Pakistan

1 The Balochistan province of Pakistan has the largest

area. It accounts 24 per cent (347,100 km2) of the total

area of Pakistan. Neighboring regions are Iranian

Balochistan to the west, Afghanistan and the Federal

Administered Tribal Area (FATA) to the north and Punjab

and Sindh province to the east. To the south is the Arabian

sea. Animal husbandry is the important and trading

bazaars through out the province due to its tribal lifestyle.

mailto:samina..%[email protected]

mailto:[email protected]

Analysis of Consumption and Demand Elasticities…..

1104

provides annual data of household income and

consumption in Pakistan.

Objective

The objective of this study is to estimate demand elasticities and households’

consumption patterns in the urban and rural

Balochistan province. The study applies the

AIDS model introduced by Deaton and

Muellabauer (1980a). In Pakistan, the

magnitude of efforts in this area turns out to be

too thin with data for the year 2005-06. It will

provide biasness if ignored altogether. The rest

of the study is organized as follows: Literature

review is presented in the following section 2.

Next section that is 3, deals with the data set

and methodology. Section 4 shows data – descriptive statistics, results and discussion.

Finally, section 5 consists of conclusion and

policy implication.

Review of Literature

There is an extensive empirical literature on

consumer demand analysis and non-income

characteristics in developed and under-

developed countries. Numerous studies in

Pakistan utilize different models and data composition to estimate households’

consumption patterns. These include:Mukhtar.

H.,(1985), Iqbal.R., and Jamal.H.,(1992),

Eatzaz and Arshad(2007), Malik. S., and Aziz.

B., (2006), Burney and Khan (1991), Siddiqu

R.,(1982), Akhter and Burney (1990), Ahmed,

Ludlow and Stern (1988), Sohail and Sarwar

(1993), Alderman (1988), Malik (1982) etc.

Sohail and Sarwar (1993) use HIES data of the

year 1987-88 to analyze existence or absence

of similarity in expenditure pattern relative to with or without remittances for Pakistan. A

linear relationship between per capita

expenditure and per capita total expenditure

whereas domestic and foreign remittances are

used as dummy variables. The six linear

functional forms are estimated for three

expenditure groups i.e. consumption

expenditure, durable expenditure and total

expenditure (consumption expenditure and

durable expenditure).

Siddiqui,R., (1982) examines consumption

pattern. She tests the stability of consumer

behavior by using the HIES data of the year

1971-72 with pooled data for the years 1968-

69 and 1971-72. She also specifies linear and

log linear relationship between expenditure on various commodities, household size and

income. Five commodity groups and seven

food items are taken for aggregated and

disaggregated analysis respectively.

Burney and Khan (1991) analyze the

consumption pattern in rural and urban sectors

of Pakistan by using the HIES data of the year

1984-85 with linear and double log forms.

They make groups and divide commodities

into twelve major categories namely food and

drinks, clothing and foot wear, fuel and

lighting, housing, transport and communication, house effects, personal

effects, health care, education, entertainment,

durables and miscellaneous.

Jamal and Iqbal (1992) attempt to determine

regional differences in consumption behavior

by using HIES data for the year 1986-88 using

ELES (Extended Linear Expenditure System)

model in their study.

Eatzaz and Arshad (2007) use a quadratic

expenditure system to estimate the household

budget analysis for rural and urban sectors of Pakistan. Out of twenty two group categories,

ten are defined as food categories and the rests

are included in non-food categories. The data

is obtained from HIES for the year 2000-01.

Mukhtar, H., (1985) uses ELES in order to

estimate the consumer demand for rural-urban

Pakistan. The data is taken from HIES for the

years 1963, 1964, 1966 (urban sample only),

1968-69, 1970-71, 1971-72 and 1979

(published in 1982). The household monthly

expenditures are divided into seven major

categories. The comprehensive sub-division of each category is also mentioned.

Alderman (1988) estimates income and price

elasticities on consumer demand by using

AIDS and expenditure survey for the year

1979 along with urban survey conducted in

1982. Malik, S., and Aziz, B., (2006) follow

the time series approach for the analysis of

consumer demand and structural changes in


1105

Pakistan. They use LA/AIDS model with time

period from 1950-51 to 2003-04.

These comprehensive studies address various

issues relating to household consumption

pattern in rural-urban households of Pakistan. None of them have analyzed consumption and

demand elasticities of food products for

Balochistan by applying LA/AIDS and 2005-

06 household data tape.

Data and Methodology

The estimations of demand elasticities and

households’ consumption pattern are based on

the Household Income and Expenditure

Survey (HIES). This survey was conducted by

the Federal Bureau of Statistics on annual basis2. We use the survey for 2005-06. The

data tapes were being the latest available at the

start of this study. The universe of HIES

survey consists of all urban and rural areas.

The raising factors given in the survey are

used to give household weights3 to correct for

over sampling of some provinces or locations.

The current study area is the biggest province

of Pakistan that is Balochistan. The net sample

consists of over 2037 households. The portion

of Balochistan households is 13.3 percent in the total samples of Pakistan4. The

compositions of urban and rural households

are respectively 728 and 1309 households.

At the first stage we obtain the monthly

quantities consumed (for thirty seven food

2 The survey is spread over a year that commences in the

first quarter from July and completes by next June. In

order to obtain the better quality of data from the female

respondents, the relevant parts of consumption

expenditure of food and non-food items (fortnightly and

monthly) have been included in the female part whereas,

information which is considered to be answered better by

the male household respondents are included in the male

part of the questionnaire.

3 The weights assigned from lowest 13.75 to the largest

8707.44.

4 The gross sample consists of over 15453 households and

excluded 139 households (139*100/15453=0.89 per cent)

from the given recorded sample due to insufficient

information regarding their consumption The net sample

consists of 15314 households.

commodities)5 and their respective

consumption expenditures. The food

expenditures include the sum value of paid and

consumed, wages and salaries in kind, own

produced and consumed receipts from

assistance, gift, dowry etc.

In the second stage we construct adult

equivalent household size. The demographic

categories of households with respect to their

age and gender compositions are arranged for

this. The demographic categories of

households are as follows. The categories of

children are between the age of 0 and 05, and

the age of 05 and 10. The categories of male

adult are between the age of 10 and 15, the age

of 15 and 25, the age of 25 and 65 and the age

of greater than 65. The categories of female adult are between the age of 10 and 15, the age

of 15 and 25, the age of 25 and 40 and the age

greater than 40.

The adult equivalent household age and gender

size, prices6 and budget shares of each food

item are also reported.

Methodology

In order to attain the central objective of the study, three stages are described here. The first

includes the construction of equivalence

scales; the second consists of the households’

consumption for food commodity groups, per

adult equivalent. The final stage applies the

Almost Ideal Demand System (AIDS) to

estimate a complete demand system for

elasticities. The construction of equivalence

scales depends on the use of nutritional

requirements of different age and gender

groups as “we assign the average calorie

requirements to household composition of age and gender as mentioned in the data set. The

reference calorie requirement is taken to be

2550 calories for a male adult between the age

5 Food quantities consumption cover milk ,butter, beef,

mutton, chicken ,egg ,fish, banana, apple, grape, mango,

ofruit,potato,tomato,cabbge,karela,wsugar,confect,barfee,g

lucose,bervgs,squash,wheat,rice,otcerl,gram,dalcha,mash,

moong,masoor,dghee,bghee,cookoil,ttea,buisct,bread,naan 6 prices of each item are obtained by dividing households’

food expenditure on its quantity consumed. The final data

set consist of monthly expenditure and food quantities

consumed.


1106

of 25 and 65. The value corresponding to a

chosen reference male adult between the age

of 25 and 65 is set equal to unity. The values of

adult equivalent that correspond to other

households of age and gender categories types

are then expressed relative to this base”.

Estimates of adult equivalents for some

households is understated because we have no

direct information on adult females which

would allow us to incorporate the additional

calorie requirements for pregnancy and

lactation.

Table 1 depicts the calorie requirements and

adult equivalent scales with respect to age and

gender compositions. The calorie intakes are

respectively 1754 and 1835 units for both

gender compositions of the age between 0 and

5 and between 5 and 10. The calorie intakes

for male of the age between 10 and 15, 15 and

25, 25 and 65 and greater than 65 are 2300,

2750, 2550 and 2170 units respectively. The

calorie intakes for female of the age between 10 and 15, 15 and 25, 25 and 40 and greater

than 40 are 2250, 2130, 2160 and 1905 units

respectively. The reference calorie

requirement is taken to be 2550 calories for a

male adult between the age of 25 and 65. The

value corresponding to a chosen reference

male adult between the age of 25 and 65 is set

equal to unity as adult equivalent scale. The

values of other adult equivalent scales of age

and gender compositions are less than unity

except in the case of male with age between 15

and 25.

Table 1: Daily calorie requirements and adult equivalent scales by age and gender

Calorie Requirements Adult Equivalent Scales

Age Both Male Female Both Male Female

0 - 5 1754 1754/2550=0.68

5 – 10 1835 1835/2550=0.71

10 - 15 2300 2250 2300/2550=0.90 2250/2550=0.88

15 – 25 2750 2130 2750/2550=1.07 2130/2550=0.83

25 – 65 2550 2550/2550=1

> 65 2170 2170/2550=0.85

25 - 40 2160 2160/2550=0.84

> 40 1906 1906/2550=0.74

Source: Nutritional compositions of demographic compositions are taken from tables published by

the Planning Division (1985) as well as Ercelawn, A., discussion paper (May, 1991).

In the next step we compute the adult

equivalent household size on the basis of

mentioned adult equivalent scales.

nad=0.68nc0-5+0.71nc5-10+0.91nm10-

15+1.07nm15-25+nm25-65+0.85nmg65+0.88nf10-

15+0.83nf15-25 +0.85nf25-40 +0.74nfg40.

Where

nad = Adult Equivalent Household size.

nc0-5 = Children between the age of 0 and 5.

nc5-10 = Children between the age of 5 and

10.

nm10-15 = Male between the age of 10 and 15.



nmg65 = Male the age greater than 65.

nf10-15 = Female between the age of 10 and

15.


25.


40.

nfg40 = Female the age greater than 40.


1107

The food-expenditure relationship is

estimated as:

Food = ƒ (lntexp) ---------- (A)

The dependent variable food and

independent variable lntexp are logarithm of

monthly food and total consumption

expenditure per adult equivalent

respectively. The AIDS model is usually

specified by Deaton and Muellabauer

(1980a, 1980b) as:

wi = αi + Σ γij Pj + βi ln (x/p) ---------- (1)

Where wi is the share of ith good in the

household’s budget; x is total expenditure, Pj is the price of jth good, and P is a properly

defined price aggregator.

The price aggregator (index) is given by:

ln P = Σ αi ln (pi) + 1/2 Σ Σ γij ln (pi) ln (pj)

----------(2)

To avoid the non-linear estimation due to

equation (2), we follow the procedure of

Stone (1953) and Ray (1979) with some

modification in the form which includes the Demographic compositions of households.

The Stone price index (P*):

ln P* = Σ wj ln (pi) -----------(3)

The resulting model is called the “Linear

Approximate AIDS” (LA/AIDS):

wi = αi + Σ γij Pj + βi ln (x/p*) + Σ φi zk---- (4)

In equation (4), x is per adult equivalent

expenditure of household. zk is adult

equivalent age and gender demographic

groups of household7

The following formulae are obtained (see the study by Ahmed, U.A. and Shams,Y., (1994)

for derivation) for expenditure Єi and

uncompensated own and cross price

elasticity eij.

Єi = 1+ (βi / Wi ) ---------(5)

7 age and gender demographic groups are z1= children

between the age of 0 and 15, z2= male the age greater

than 14 and z3= female the age greater than 14

respectively

eij = (γij -βiwj) /wi – σij ------------(6)

The values of eij are 1 and zero in the case of

own price and cross price elasticity

respectively. The compensated own and

cross price elasticities can be computed by

using the Slutsky equation in elasticity form: eij = eH

ij - wj Єi --------------(7)

where eHij is the compensated (Hicksian)

price elasticity.

Data – Descriptive Statistics, Results and

Discussion

In this section we include data-descriptive

statistics with respect to Balochistan and its

both urban and rural areas.

Table 2 reports average members of

households. The average members of adult equivalent household size for total area of

Baluchistan that is both urban and rural areas

are 6.67, 7.11 and 6.42 respectively. The

total households are respectively 2037, 728

and 1309.

Average monthly food and total expenditure

per adult equivalent are reported in Table 3.

Average monthly food consumption

expenditures are Rs.146.47, Rs.181.96 and

Rs.126.74 respectively. The average total

monthly expenditures are Rs.407.97,

Rs.538.37 and Rs.310.42. The average

monthly food and total expenditure of urban

areas are larger than rural areas of

Balochistan.

The average monthly budget shares of

different items in percentage are reported in

Table 4. The percentage budget share of

wheat is larger than others. The average

monthly wheat budget shares are 11.61, 8.84

and 13.15 percent. The total monthly budget

shares of selected food items are 35.57,

29.83 and 38.78 per cent respectively. The

share of rural households is larger than other.


1108

Table -2 Household size and Adult Equivalent (A.E) household size, 2005-06

Area Households A.E household size

Balochistan 2037 6.67

Urban Balochistan 728 7.11

Rural Balochistan 1309 6.42

Source: Computed by authors based on HIES data of Pakistan for the year 2005-06.

Table-3 Average monthly food and total expenditure per adult equivalent

Area Food (Rs.) Total Exp.(Rs.) Households

Balochistan 146.47 407.97 2037

Urban Balochistan 181.96 538.37 728

Rural Balochistan 126.74 310.42 1309


Table- 4 Average monthly budget share of different food items8 (in %)

Area

Food Series Balochistan Urban Balochistan Rural Balochistan

Milk 5.55 4.958319 5.875921

Beef 2.18 2.150046 2.202874

Mutton 2.11 1.868382 2.243211

Chicken 2.05 1.731965 2.229165

Wheat 11.61 8.846313 13.15205

Rice 1.75 1.619273 1.819424

Sugar

4.06

3.500503

4.37236

Banaspati Ghee 4.54 3.678358 5.025664

Tea 1.72 1.477122 1.86275

Total 35.57 29.83028 38.78342

Source: Computed by authors based on HIES data of Pakistan for the year 2005- 8 we report the average monthly budget share of selected food items only

The Food-expenditure relationship

The food-expenditure relationship is presented

in Figures 1 to 3. Figure 1 shows the food-

expenditure relationship for overall households

of Balochistan. Figures 1 and 2 depict the

food-expenditure relationship for the urban

and rural households respectively.

The households’ food consumption

expenditure is increasing at decreasing rate.

This implies that when total expenditure

(income) is increasing, households’ food consumption expenditure is also increasing

with less proportion.

Figure 1 indicates that 85% households of

Balochistan per adult equivalent expenditure

(income) in the range Rs. 0-2000, while the

correspondence expenditure on food is in the

range Rs. 0-400.


1109

8000.006000.004000.002000.000.00

Total monthly exp.per adult equivalent

1000.00

800.00

600.00

400.00

200.00

0.00

Total monthly exp.on food items per adult equivalent

Logarithmic

Observed

Figure 1 Food-expenditure relationship: Balochistan (2005-06)

Figures 2 and 3 indicate that per adult equivalent expenditure (Income) of 88% urban and rural

households are Rs.0-1500 and Rs.0-1000 per month and expenditure on food are Rs.0-450 and

Rs.0-250 per month.

5000.004000.003000.002000.001000.000.00


1000.00

800.00

600.00

400.00

200.00

0.00


Logarithmic

Observed

Figure 2 Food-expenditure relationship: Urban Balochistan (2005-06)


1110

8000.006000.004000.002000.000.00


600.00

400.00

200.00

0.00


Logarithmic

Observed

Figure 3 Food-expenditure relationship: Rural Balochistan (2005-06)

Analytical tools of central importance are the price elasticity, expenditure elasticities and

cross price elasticity of demand. The price

elasticity of demand is a quantitative measure

of the responsiveness of purchase decisions to

variations in price. The price elasticities of

demand for different items and regions often

differ substantially.

Income (expenditure) may be interpreted as

the percentage change in quantity demand

when income (expenditure) changes roughly

by one percent. It indicates the nature of different commodity items. Similarly, the

cross price elasticity indicates the causal

relationship of different commodity items. The

quantity of a commodity purchased in the

market depends not only on its price and

household’s income but also on the price of

related commodities. Cross elasticity of

demand by definition is the percentage change

in the quantity demanded of one commodity

caused by one percent change in the price of

other items. The cross price elasticity may be positive or negative. In the case of

complement goods cross price elasticity is

negative and is positive for substitute goods.

In the following section we examine the estimates of uncompensated and compensated

own-price elasticities and income

(expenditure) elasticities of different food

items.

From Table 5, it is clear that signs of own

price elasticities satisfy the economic criteria.

The low uncompensated price elasticity for

gram, masoor, potato, tomato and mash

probably reflect the fact that households in this

market have much larger than average income.

This implies that the income effects of price variations are likely to be small. The larger

values of different food items like glucose,

butter, and biscuit imply that there exist many

close substitutes for them than other food

items. Low expenditure elasticities reflect that

households have to spend on these items

irrespective of the level of their income

(expenditure). All the food items are

considered as necessities in the case of

Balochistan. This implies that the expenditure

on these items does not vary greatly with households’ total expenditure.


1111

Table 5: Own price and expenditure elasticities of selected food items: Balochistan (2005-06)


Table 6 provides a detailed report on own

price compensated and uncompensated

expenditure elasticities for the urban region of

Balochistan. The estimates suggest that urban households are quite responsive to change in

prices in adjusting their food items

consumption. The absolute value of wheat and

rice for example is small indicating that there

exist less close substitutes for them than other

food items. The estimated own-price

elasticities indicate if, for example, the wheat

price fall by 10 per cent then demand for

wheat would increase by 6.6 per cent. Of this

total increase in demand, only 5.8 per cent is

purely due to price effect (i.e, the substitution effect) as the compensated elasticity suggests.

The income effect is relatively large in wheat

demand because wheat has a largest share in

household budget. The demand for rice would

increase by 13.2 per cent (i.e., 6.6 + 6.6) if per

adult equivalent income increases by 10 per

cent.

Own Price Elasticities

Expenditure

Elasticities Commodity Uncompensated Compensated

Milk -0.68242 -0.63747 0.81

Butter -7.82787 -7.82688 0.71

Sugar -0.69852 -0.66726 0.77

Glucose -19.6169 -19.6167 0.73

Tea -1.24412 -1.23105 0.76

Biscuit -2.18031 -2.17842 0.90

Beef -0.6317 -0.6162 0.71

Mutton -0.50421 -0.48924 0.71

Chicken -0.59607 -0.58171 0.70

Potato -0.42472 -0.41337 0.70

Tomato -0.4875 -0.4832 0.68

Karela -0.54375 -0.53763 0.67

Gram -0.2379 -0.2368 0.52

Dalchana -0.52651 -0.52423 0.69

Mash -0.45281 -0.45065 0.68

Masoor -0.32298 -0.32201 0.54

Vegetable Ghee -0.81567 -0.7825 0.73

Wheat -0.666 -0.58935 0.66

Rice -0.63814 -0.01579 0.88

Other cereal -11.2879 -11.2878 0.60

Moong -0.56326 -0.56068 0.72


1112

Table 6: Own price and expenditure elasticities of selected food items: Urban Balochistan

(2005-06)


Expenditure Elasticities Commodity Uncompensated Compensated

Milk -0.76752 -0.72245 0.90929

Butter -3.824 -3.82335 0.709613

Sugar -0.767 -0.73863 0.802304

Glucose -16.414 -16.4141 0.919252

Tea -1.289 -1.27651 0.813369

Biscuit -2.086 -2.0842 0.944781

Beef -0.68312 -0.6687 0.671324

Mutton -0.54207 -0.52757 0.77582

Chicken -0.61794 -0.60441 0.782431

Potato -0.36235 -0.35324 0.743936

Tomato -0.46999 -0.46594 0.748451

Karela -0.62008 -0.61418 0.723677

Gram -0.22838 -0.22724 0.667798

Dalchana -0.5667 -0.56396 0.978025

Mash -0.46485 -0.46329 0.698119

Masoor -0.31981 -0.31848 0.787517

Vegetable

Ghee -0.84341 -0.80616 1.012091

Wheat -0.666 -0.58935 0.660036

Rice -0.63814 -0.62276 0.874009

Other

cereal -11.2879 -11.2878 0.676006

Moong -0.56326 -0.56068 0.710404


The estimates of uncompensated and

compensated own price elasticities and

expenditure elasticities for the households of rural Balochistan obtained from the LA/AIDS

model are reported in Table 7.

The own uncompensated and compensated

price elasticities of food items have elastic and

inelastic behavior. The similar conditions exist

for these items as in the case of urban

Balochistan. The food items like butter, biscuit

and other cereal have elastic price elasticities.

This implies that they have larger substitute

items than other. The food items like milk,

butter, sugar, biscuit, beef, mutton, chicken, potato, wheat, etc are considered necessities.

The expenditure elasticity of these items is less

than one. The expenditure elasticity for

vegetable ghee is greater than one which

implies that when households’ income

changes, there will be larger change in its

consumption.


1113

Table 7: Own price and expenditure elasticities of selected. food items: Rural Balochistan (2005-

06)


Expenditure Elasticities Commodity Uncompensated Compensated

Milk -0.63862 -0.59099 0.9

Butter -7.82787 -7.82688 0.71

Sugar -0.69852 -0.66726 0.8

Glucose -19.6169 -19.6167 0.91

Tea -1.24412 -1.23105 0.81

Biscuit -2.18031 -2.17842 0.94

Beef -0.60863 -0.59301 0.67

Mutton -0.53278 -0.48924 0.77

Chicken -0.62796 -0.58171 0.78

Potato -0.49223 -0.41337 0.74

Tomato -0.52994 -0.4832 0.75

Karela -0.56993 -0.53763 0.72

Gram -0.32668 -0.2368 0.67

Dalchana -0.56505 -0.52423 0.98

Mash -0.51723 -0.45065 0.69

Masoor -0.38688 -0.32201 0.78

Vegetable

Ghee -0.83239 -0.7825 1.012

Wheat -0.51789 -0.4311 0.66

Rice -0.63814 -0.62276 0.87

Other

cereal -11.2879 -11.2878 0.67

Moong -0.56326 -0.56068 0.71


Cross-price elasticities

Tables 8 to 24 provide the entire

uncompensated and compensated price

elasticities matrices for Balochistan and its

both sectors. We arrange the food items into

three separate groups. The first group includes milk, butter, sugar, glucose, tea and biscuit

respectively. The second includes beef,

mutton, chicken, potato, tomato, karela, gram,

dal chana, dal mash, masoor, and vegetable

ghee; the last one includes wheat, rice, other

cereal, mash, masoor, dal chana, moong,

vegetable ghee. The groups are formed here in

order to check the nature of items with respect

to substitutes and complements. We estimate

the LA/AIDS model for each groups

separately.

In each case we estimate three separate

LA/AIDS models. In the case of

uncompensated cross price elasticities, the

gross effects include both the substitution and

income effects. The pure price effects are presented in the form of compensated cross

price elasticities. In the case of Balochistan,

milk and sugar have complementary

relationship either with respect to price of milk

or with respect to price of sugar. The behavior

of sugar and tea is gross substitutes with each

other (Table 8). A ten per cent increase in milk

price would result in a 0.5 per cent decreased

demand for sugar.

The cross price elasticity between beef and

mutton is negative with each other (Table 9)


1114

which implies that they have complementary

relationships. The economic theory suggests

that these goods should be substitutes.

However ,in our study, they have

complementary behavior. With respect to

price of chicken the cross price elasticity between chicken and mutton is positive. This

implies that they have the substitute

relationships with each other. A 10 per cent

increase in chicken price would result in 0.04

per cent increased demand for mutton. The

cross price elasticity between wheat and rice is

positive (Table 10) which implies that they are

substitutes with respect to price of wheat. But

with respect to price of rice they have

complement relationships. The same condition

exists in the case of most food items like milk

and butter, mutton and chicken, wheat and other cereal, etc.

The compensated cross price elasticity

between milk and sugar is negative (Table 11)

implying that they have net complementary

relationship with each other. In case of beef

and mutton the cross price elasticity is also

negative (Table 12) showing that there exists a net complementary relationship. The

compensated cross price elasticity between

wheat and rice includes the same relationship

with each other.

Some cross-price elasticities change signs

between their uncompensated and

compensated forms. In the case of milk and

tea, they are gross complements (Table 8).

However, in the case of compensated cross

price elasticity they have net substitute

relationships (Table 11).

Table 8: Uncompensated own and cross price elasticities of food products: Balochistan (2005-06)

Demand for

Price of Milk Butter Sugar Glucose Tea Biscuits

Milk -0.682 0.263109 -0.05126 0.065651 -0.00845186 -0.019762

Butter -0.204 -7.82787 -0.00015 0.1569224 0.03630835 0.0087516

Sugar -0.13 0.138562 -0.69852 -0.3412145 0.02134265 0.1998588

Glucose 0.0947 0.079691 -0.00273 -19.6169 -0.00012381 0.1864429

Tea 0.1492 0.292009 0.04862 0.1521537 -1.244118 0.0544421

Biscuits -0.029 -0.13797 0.04236 0.0496187 -0.00939043 -2.1803


Table 9: Uncompensated own and cross price elasticities of food products: Balochistan (2005-06)

Demand for

Price of Beef Mutton Chicken Potato Tomato Karela Gram Dalcha Mash Masoor Bghee

Beef -

0.6317

-

0.0423 -0.0301

-

0.0254 -0.0055

-

0.0252 0.0034

-

0.0194

-

0.0207 0.0007 0.0092

Mutton

-

0.0356 -

0.5042 -0.0145

-

0.0014 -0.0023

-

0.0307 -0.0084

-

0.0218 0.0017 -0.0208 -0.0092

Chicken -0.0495 0.0044 -0.5961 0.0246 0.0283

-0.0610 -0.0092

-0.0163

-0.0031 -0.0098 -0.0020

Potato

-

0.0170

-

0.5031 -0.1636 -

0.4247 -0.0453

-

0.1536 -0.0519

-

0.0754

-

0.0081 -0.1592 -0.0246

Tomato 0.0084

-

0.0498 0.0044 0.0570 -0.4875

-

0.0776 -0.0205

-

0.0996 0.0110 -0.0667 -0.0142

Karela

-

0.0335

-

0.0268 0.0055

-

0.0566 -0.0089 -

0.5438 0.0320 0.0070 0.0214 0.0049 0.0099

Gram

-

0.0039

-

0.0092 -0.0135 0.0096 0.0336 0.0157 -0.2379

-

0.0084

-

0.0507 -0.0131 0.0012


1115

Dacha

-

0.0196 0.0033 -0.0041

-

0.0031 -0.0119

-

0.0779 -0.0052 -

0.5265

-

0.0642 -0.0394 -0.0163

Mash 0.0153 0.0577 0.0063 0.0005 0.0211

-

0.0865 0.0082

-

0.0300 -

0.4528 -0.0114 0.0131

Masoor 0.0120

-

0.0137 -0.0027

-

0.0221 0.0133

-

0.0002 -0.0289

-

0.0515

-

0.0558 -0.3230 -0.0104

Bghee 0.0022

-

0.0194 -0.0018

-

0.0260 -0.0125 0.0179 -0.0276

-

0.0032 0.0059 -0.0288 -0.8157


Table 10:Uncompensated own and cross price elasticities of food products: Balochistan (2005-06)


Table-11: Compensated own and cross price elasticities of food products: Balochistan (2005-06)


Demand for

Price of Wheat Rice Otcereal Dalcha Mash Moong Masoor Bghee

Wheat -0.666 0.22856 -0.365048 0.09424 0.1647748 0.13055 -0.006057 -0.0178951

Rice -0.06194 -0.63814 0.183393 -0.082753 -0.038839 -0.09171 -0.065308 0.01009427

Otcereal 0.02535 0.133795 -11.28788 0.021993 0.0068952 0.02277 0.003776 0.00665067

Dalcha -0.01781 0.007395 -0.079922 -0.53408 -0.066048 -0.05007 -0.049712 -0.0210149

Mash 0.01764 -0.15685 0.121769 -0.034632 -0.45136 -0.02914 -0.018919 0.01148761

Moong 0.00648 -0.00552 0.151358 -0.078427 -0.089905 -0.5633 -0.039163 -0.0078842

Masoor -0.00727 -0.06562 -0.070671 -0.051662 -0.05349 -0.02702 -0.322731 -0.0119401

Bghee -0.0025 -0.02793 0.040453 0.000354 0.0054154 -0.01458 -0.029765 -0.8115251

Demand for


Milk -0.637466 0.3025138 -0.0085266 0.106166037 0.033728142 0.030188434

Butter -0.2030425 -7.82687 0.00093038 0.157944379 0.037372354 0.010011619

Sugar -0.0973238 0.1673878 -0.667262 -0.31157651 0.052198654 0.236398812

Glucose 0.09499288 0.0799043 -0.002496 -19.616695 0.000104191 0.186712879

Tea 0.16309845 0.3042212 0.06186446 0.16470973 -1.23104664 0.069922118

Biscuits -0.0276911 -0.136475 0.04397877 0.051151685 -0.00779443 -2.17841822


1116

Table 12: Compensated own and cross price elasticities of food products: Balochistan (2005-06)

Source: Computed by authors based on HIES data of Pakistan for the year 2005-0

Table 13: Compensated own and cross price elasticities of food products: Balochistan (2005-06)

Demand for


Wheat -0.5893 -0.27284 -0.295368 0.1743709 0.2437448 0.21416 0.0566546 0.066882

Rice -0.0504 -0.0157 0.1938799 -0.0706922 -0.0269536 -0.079121 -0.055869 0.022854

Otcereal 0.02544 0.01693 -11.2878 0.0220854 0.0069865 0.022863 0.0038482 0.006749

Dalcha -0.0156 0.0103 -0.077938 -0.531799 -0.0637994 -0.04769 -0.047927 -0.0186

Mash 0.01974 -0.15406 0.1236742 -0.0324412 -0.449200 -0.026851 -0.017205 0.013806

Moong 0.00885 -0.00236 0.1535106 -0.0759515 -0.0874659 -0.56067 -0.037226 -0.00527

Masoor -0.0058 -0.0637 -0.069367 -0.0501625 -0.0520125 -0.02546 -0.321558 -0.01035

Bghee 0.02749 0.01205 0.0677182 0.0317087 0.0363156 0.018141 -0.005227 -0.77835


Demand for


Beef -0.616

-

0.0268 -0.015 -0.010 0.0094 -0.0105 0.0147

-

0.0044 -0.006 0.0105 0.0251

Mutton

-

0.0206 -

0.4892 0.0003 0.01336 0.012 -0.0166 0.0025

-

0.0073 0.016

-

0.0113 0.0062

Chicken

-

0.0349 0.0189 -0.5817 0.03895 0.0422 -0.0473 0.0015

-

0.0021 0.0109

-

0.0006 0.013

Potato

-

0.0055

-

0.4916 -0.1522 -0.4134 -0.034 -0.1427 -0.044 -0.065 0.0029

-

0.1519 -0.013

Tomato 0.0129

-

0.0453 0.0089 0.06143 -0.483 -0.0734 -0.0172

-

0.0953 0.0153

-

0.0638 -0.01

Karela -0.027

-

0.0203 0.0119 -0.0502 -0.003 -0.5376 0.0367 0.0133 0.0276 0.009 0.0166

Gram

-

0.0024

-

0.0077 -0.012 0.01111 0.035 0.01711 -0.2368

-

0.0069 -0.049

-

0.0121 0.0027

Dacha

-

0.0173 0.0057 -0.0018 -0.0008 -0.01 -0.0757 -0.0035 -

0.5242 -0.062

-

0.0379 -0.014

Mash 0.0175 0.0599 0.0085 0.00275 0.0232 -0.0844 0.0098

-

0.0278 -0.451

-

0.0099 0.0154

Masoor 0.0136 -0.0122 -0.0012 -0.0206 0.0148 0.00127 -0.0277 -0.05 -0.054 -0.322 -0.009

Bghee 0.0344 0.0129 0.03 0.00581 0.0184 0.04831 -0.004 0.0281 0.0368

-

0.0083 -0.783


1117

Tables 14-19 show the uncompensated and

compensated own and cross price elasticities

of food items for urban Balochistan. The cross

price elasticity between milk and butter is

positive with respect to price of milk. This

implies that they have the gross substitute relationship. A 10 per cent increase in the

price of milk responses a 1.45 per cent

increase in the demand of butter. With respect

to price of sugar, the uncompensated elasticity

between sugar and tea is negative, while it is

positive with respect to price of tea (Table 14).

Beef and mutton have complementary

relationships with each other (Table 15). A 10

per cent fall in beef price would result in 0.58

per cent increased demand for mutton. The

cross elasticity indicates the effect of change

in beef price on mutton demand in our

explanation. Wheat and rice indicate the

mixed trend for each other (Table 16). The

uncompensated cross price elasticity between wheat and rice are positive with respect to

price of wheat. It is negative with respect to

price of rice. The same condition exists for

most of the food items. However, in the case

of negative cross price elasticity, the food

items are gross substitutes and gross

complements in the case of negative

uncompensated cross price elasticity.

Table 14: Uncompensated own and cross price elasticities of food products Urban Balochistan

(2005-06)

Demand for


Milk -0.7675239 0.145 -0.065 0.115 -0.014 0.010

Butter -0.0055089 -3.824 -0.060 0.164 0.019 -0.051

Sugar -0.1744043 -0.341 -0.767 -0.200 -0.006 0.172

Glucose 0.11187325 -0.393 -0.026 -16.414 -0.010 0.323

Tea 0.14285467 0.504 0.019 -0.080 -1.289 0.157

Biscuits -0.0196585 -0.373 0.028 -0.048 -0.024 -2.086


Table 15: Uncompensated own and cross price elasticities of food products: Urban Balochistan

(2005-06)

Demand for


Beef -0.683 -0.058 -0.0303 -0.032 -0.023 -0.0369 0.0092 -0.0215 -0.009 -0.008 0.01183

Mutton -0.045 -0.542 -0.0205 -0.025 -0.02 -0.0313 -0.0129 -0.0349 -0.033 -0.021 -0.0095

Chicken -0.051 -0.032 -0.6179 0.016 0.0163 -0.0841 -0.0237 -0.0259 -0.026 -0.022 -0.0074

Potato -0.252 -0.009 -0.1864 -0.362 -0.055 -0.1734 -0.1101 0.02717 -0.023 0.1538 0.04017

Tomato 0.0363 -0.051 -0.0071 0.083 -0.47 -0.1291 -0.0888 -0.0832 -0.008 -0.047 -0.0347

Karela -0.088 -0.011 0.0357 -0.01 0.0171 -0.620 0.0557 0.01123 0.015 0.0015 0.02473

Gram 0.0173 0.0127 -0.0111 0.027 0.029 0.0446 -0.229 0.00016 -6E-04 0.0081 0.00719

Dacha -0.004 0.0028 -0.0056 -0.032 0.0041 -0.0688 -0.034 -0.5667 -0.033 -0.027 -0.0333

Mash -0.002 0.0356 0.0062 -0.022 0.0259 -0.0935 0.0259 -0.0336 -0.465 -0.037 -0.0088

Masoor 0.0039 -0.038 -0.008 -0.008 0.0036 -0.0179 -0.0366 -0.0486 -0.046 -0.32 -0.0161

Bghee -0.011 -0.08 -0.0099 0.008 0.0084 0.0727 -0.0465 -0.0182 -0.031 -0.051 -0.8434


1118

Table 16: Uncompensated own and cross price elasticities of food products: Urban Balochistan

(2005-06)

Demand for


Wheat -0.666 0.2286 -0.365 0.094 0.1648 0.1305 -0.0061 -0.0179

Rice -0.062 -0.638 0.1834 -0.083 -0.039 -0.0917 -0.0653 0.01009

Otcereal 0.0254 0.1338 -11.288 0.022 0.0069 0.0228 0.0038 0.00665

Dalcha -0.018 0.0074 -0.0799 -0.534 -0.066 -0.0501 -0.0497 -0.021

Mash 0.0176 -0.157 0.1218 -0.035 -0.451 -0.0291 -0.0189 0.01149

Moong 0.0065 -0.006 0.1514 -0.078 -0.09 -0.5633 -0.0392 -0.0079

Masoor -0.007 -0.066 -0.0707 -0.052 -0.053 -0.027 -0.3227 -0.0119

Bghee -0.003 -0.028 0.0405 4E-04 0.0054 -0.0146 -0.0298 -0.8115


Table 17: Compensated own and cross price elasticities of food products: Urban Balochistan

(2005-06)

Demand for


Milk -0.722 0.1803 -0.0255 0.16 0.0261 0.0573

Butter -0.005 -3.823 -0.0593 0.164 0.0194 -0.05

Sugar -0.143 -0.316 -0.7386 -0.167 0.0219 0.205

Glucose 0.1121 -0.393 -0.0257 -16.41 -0.009 0.3236

Tea 0.1563 0.5141 0.0304 -0.067 -1.277 0.1712

Biscuits -0.018 -0.372 0.0297 -0.046 -0.022 -2.0842



(2005-06)

Demand for


Beef -0.669 -0.041 -0.0135 -0.016 -0.007 -0.0214 0.0236 -0.0005 0.005 0.0087 0.03359

Mutton -0.032 -0.528 -0.0059 -0.011 -0.006 -0.0178 -0.0004 -0.0166 -0.02 -0.006 0.00945

Chicken -0.039 -0.019 -0.6044 0.029 0.0292 -0.0716 -0.0121 -0.009 -0.014 -0.009 0.01011

Potato -0.243 0.0008 -0.1767 -0.353 -0.046 -0.1645 -0.1019 0.0392 -0.015 0.1634 0.05261

Tomato 0.0401 -0.047 -0.0029 0.087 -0.466 -0.1252 -0.0852 -0.0779 -0.004 -0.043 -0.0292

Karela -0.083 -0.005 0.0421 -0.004 0.0232 -0.615 0.0612 0.01925 0.021 0.0079 0.03303

Gram 0.0185 0.014 -0.0097 0.028 0.0303 0.0459 -0.227 0.00183 6E-04 0.0094 0.00891

Dacha -0.002 0.0049 -0.0034 -0.03 0.0062 -0.0668 -0.0321 -0.564 -0.031 -0.025 -0.0305

Mash 0.0001 0.0374 0.008 -0.021 0.0276 -0.0918 0.0274 -0.0313 -0.46 -0.035 -0.0065

Masoor 0.0051 -0.036 -0.0067 -0.007 0.0049 -0.0166 -0.0354 -0.047 -0.045 -0.318 -0.0144

Bghee 0.0148 -0.051 0.0189 0.035 0.036 0.0992 -0.0218 0.01775 -0.006 -0.022 -0.8062



1119


(2005-06)

Demand for


Wheat -0.589 0.3308 -0.2954 0.174 0.2437 0.2142 0.0567 0.06688

Rice -0.05 -0.623 0.1939 -0.071 -0.027 -0.0791 -0.0559 0.02285

Otcereal 0.0254 0.1339 -11.288 0.022 0.007 0.0229 0.0038 0.00675

Dalcha -0.016 0.0103 -0.0779 -0.532 -0.064 -0.0477 -0.0479 -0.0186

Mash 0.0197 -0.154 0.1237 -0.032 -0.449 -0.0269 -0.0172 0.01381

Moong 0.0088 -0.002 0.1535 -0.076 -0.087 -0.5607 -0.0372 -0.0053

Masoor -0.006 -0.064 -0.0694 -0.05 -0.052 -0.0255 -0.3216 -0.0104

Bghee 0.0275 0.0121 0.0677 0.032 0.0363 0.0181 -0.0052 -0.7784


Table 20-25 present the uncompensated and

compensated own and cross price elasticities

in the case of rural Balochistan.

Uncompensated price elasticity between sugar

and tea is positive. This implies that they have

substitute relationship with each other

(Table20). A 10 per cent increase in the price

of sugar will increase 0.2 per cent in the

demand of tea. The relationship between beef and mutton, beef and chicken, mutton and

chicken, etc. are gross complements with each

other. A rise in the price of beef will reduce

not only the

quantity demand of beef, but also, because

beef and mutton are complements the demand

for mutton. From the Table 25, it is clear that

with respect to price of wheat the cross price

elasticities are substitutes in the case of rice,

dalchana, mash, moong, masoor, and

vegetable ghee, respectively. A rise in the

price of wheat will increase the demand for

them. There exists approximately similar condition as in the case of rural Balochistan

and urban Balochistan with reference to

compensated own and cross-price elasticities.

Table 20: Uncompensated own and cross price elasticities of food products: Rural Balochistan

(2005-06)

Demand for


Milk -0.6386 0.2631 -0.0513 0.06565 -0.00845 -0.01976

Butter -0.2414 -7.8279 -0.0001 0.15692 0.03631 0.00875

Sugar -0.1325 0.1386 -0.6985 -0.34121 0.02134 0.19986

Glucose 0.05606 0.0797 -0.0027 -19.6169 -0.00012 0.18644

Tea 0.15787 0.292 0.04862 0.15215 -1.24412 0.05444

Biscuits -0.0314 -0.138 0.04236 0.04962 -0.00939 -2.18031



1120


(2005-06)

Demand for


Beef -0.6086 -0.0397 -0.0276 -0.02232 -0.005 -0.0237 0.003 -0.0178 -0.0182 0.0007 0.00832

Mutton -0.0312 -0.5328 -0.013 -0.00088 -0.00179 -0.0286 -0.0071 -0.0197 0.0019 -0.0185 -0.008

Chicken -0.0471 0.0046 -0.628 0.02217 0.02636 -0.057 -0.0076 -0.0145 -0.0021 -0.0084 -0.0014

Potato 0.05855 -0.4731 -0.1499 -0.4922 -0.04102 -0.1442 -0.0452 -0.0687 -0.0065 -0.1435 -0.0218

Tomato -0.023 -0.0467 0.00422 0.05041 -0.5299 -0.073 -0.018 -0.0913 0.0099 -0.0602 -0.0127

Karela -0.0162 -0.0251 0.00521 -0.04971 -0.00801 -0.569 0.0284 0.0066 0.019 0.0046 0.00908

Gram -0.0175 -0.0086 -0.0123 0.00856 0.03085 0.0149 -0.326 -0.0076 -0.0446 -0.0118 0.00113

Dacha -0.0222 0.0032 -0.0037 -0.00263 -0.01086 -0.0733 -0.0045 -0.565 -0.0565 -0.0356 -0.0147

Mash 0.02867 0.0544 0.00592 0.00058 0.01943 -0.0814 0.0073 -0.0275 -0.517 -0.0102 0.01192

Masoor 0.01532 -0.0129 -0.0024 -0.01945 0.01225 -0.0001 -0.0254 -0.0473 -0.0492 -0.3869 -0.0093

Bghee -0.0382 -0.0105 -0.0223 -0.0691 0.00572 -0.0758 -0.0875 -0.0597 -0.0612 -0.0662 -0.0447



(2005-06)

Demand for


Wheat -0.5179 0.2286 -0.365 0.09424 0.16477 0.1305 -0.0061 -0.0179

Rice -0.0715 -0.6381 0.18339 -0.08275 -0.03884 -0.0917 -0.0653 0.0101

Otcereal 0.01218 0.1338 -11.288 0.02199 0.0069 0.0228 0.0038 0.0067

Dalcha -0.0193 0.0074 -0.0799 -0.53408 -0.06605 -0.0501 -0.0497 -0.021

Mash 0.01927 -0.1568 0.12177 -0.03463 -0.45136 -0.0291 -0.0189 0.0115

Moong 0.00843 -0.0055 0.15136 -0.07843 -0.08991 -0.5633 -0.0392 -0.0079

Masoor -0.0096 -0.0656 -0.0707 -0.05166 -0.05349 -0.027 -0.3227 -0.0119

Bghee -0.0007 -0.0279 0.04045 0.00035 0.00542 -0.0146 -0.0298 -0.8115


Table 23: Compensated own and cross price elasticities of food products: Rural Balochistan

(2005-06)

Demand for


Milk -0.59099 0.302514 -0.00853 0.106166 0.033728 0.030188

Butter -0.23991 -7.82688 0.00093 0.157944 0.037372 0.010012

Sugar -0.09712 0.167388 -0.66726 -0.31158 0.052199 0.236399

Glucose 0.056299 0.079904 -0.0025 -19.6167 0.000104 0.186713

Tea 0.172932 0.304221 0.061864 0.16471 -1.23105 0.069922

Biscuits -0.02968 -0.13647 0.043979 0.051152 -0.00779 -2.17842



1121


(2005-06)

Demand for


Beef -0.593 -0.027 -0.0148 -0.0101 0.0094 -0.011 0.0147 -0.0044 -0.0058 0.01054 0.0251

Mutton -0.0153 -0.489 0.00028 0.01336 0.012 -0.017 0.0025 -0.0073 0.016 -0.0113 0.0062

Chicken -0.0313 0.0189 -0.5817 0.03895 0.0422 -0.047 0.0015 -0.0021 0.01087 -0.0006 0.013

Potato 0.07161 -0.492 -0.1522 -0.4134 -0.034 -0.143 -0.0434 -0.0642 0.00292 -0.1519 -0.013

Tomato -0.0181 -0.045 0.00886 0.06143 -0.483 -0.073 -0.0172 -0.0953 0.01528 -0.0638 -0.01

Karela -0.0093 -0.02 0.0119 -0.0502 -0.003 -0.538 0.0367 0.01331 0.02759 0.00898 0.0166

Gram -0.0158 -0.008 -0.012 0.01111 0.035 0.0171 -0.236 -0.0069 -0.0492 -0.0121 0.0027

Dacha -0.0196 0.0057 -0.0018 -0.0008 -0.01 -0.076 -0.0035 -0.5242 -0.0619 -0.0379 -0.014

Mash 0.03122 0.0599 0.00854 0.00275 0.0232 -0.084 0.0098 -0.0278 -0.4507 -0.0099 0.0154

Masoor 0.01703 -0.012 -0.0012 -0.0206 0.0148 0.0013 -0.0277 -0.05 -0.0544 -0.322 -0.009

Bghee 0.0457 0.0129 0.03002 0.00581 0.0184 0.0483 -0.004 0.02813 0.0368 -0.0083 -0.783



(2005-06)

Demand for


Wheat -0.4311 0.3308 -0.2954 0.17437 0.2437 0.2142 0.0567 0.06688

Rice -0.0594 -0.623 0.19388 -0.0707 -0.027 -0.079 -0.0559 0.02285

Otcereal 0.01225 0.1339 -11.288 0.02209 0.007 0.0229 0.0038 0.00675

Dalcha -0.017 0.0103 -0.0779 -0.5318 -0.064 -0.048 -0.0479 -0.0186

Mash 0.02164 -0.154 0.12367 -0.0324 -0.449 -0.027 -0.0172 0.01381

Moong 0.01107 -0.002 0.15351 -0.076 -0.087 -0.561 -0.0372 -0.0053

Masoor -0.008 -0.064 -0.0694 -0.0502 -0.052 -0.025 -0.3216 -0.0104

Bghee 0.03252 0.0121 0.06772 0.03171 0.0363 0.0181 -0.0052 -0.7784


Conclusions and Policy Implications

This study attempts to estimate and report

households consumption and demand

elasticities in detail. This is one of the first

studies in developing countries particularly in

Pakistan to take into account adult equivalent scales in households’ consumption patterns.

The study is based upon household data

related to Household Integrated Expenditure

Survey (HIES) for the year 2005-06. The cross

sectional data especially in their disaggregated

form are far richer than time series data. The

cross sectional survey, by definition, collect

data from households. The households have

different income or total expenditure and

demographic information. The important

contribution of this study is that it covers the

least developed province of Pakistan that is

Balochistan and both its urban and rural

regions. The study has constructed adult

equivalent scale at first stage. The SPSS

package has been used in order to arrange the

data. The significance of adult equivalent

scales are supported by the estimated Engel

Curve of food items particularly. The

graphical representations have been obtained

in the case of consumption-expenditure

relationships. The consumption-expenditure

relationships show that per adult equivalent households food consumption is increasing at

a decreasing rate. According to the findings of

the current study, all food items are treated as

necessities except vegetable ghee in the case

of urban and rural Balochistan. It is treated as

luxury. The estimated food items demand


1122

elasticities with respect to price and

expenditure may be used by government

policy makers of Balochistan, WFP (World

Food Programme) and other local and

international NGOs for household food

programs. The province of Balochistan is the most poorly-developed and a food-insecure

region in Pakistan. All socio-economic indices

like literacy, health, and unemployment are

below national averages. The expenditure

elasticities of food items suggest that the

nutritional requirements will get improved

with the easy availability of food items. It can

be done through the food support programs

like food program of WFP and Benazir

Income Support Program. The policy makers

can get further assistance from the findings of

this study while targeting households’ decisions.

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